Magellan Aerospace to invest up to $120 million to support JSF work in Winnipeg

Magellan Aerospace announced today that it plans to invest up to $120 million (Cdn) in its Winnipeg Bristol Aerospace plant to facilitate work on the Joint Strike Fighter (JSF) program. The Canadian Government's Strategic Aerospace and Defence Initiative (SADI) program is providing repayable cash-flow support of up to $43.4 million (Cdn) for technology and process development. The investments commence this quarter and will be made over a period of five to seven years as the program delivery rate ramps up to full-scale production. The SADI participation supports the development of new manufacturing and process technology for composite and metallic materials for the multi-national JSF F-35 Lightning II aircraft.

Jim Butyniec, Magellan CEO, discussed the importance of participation on the JSF program: "The JSF is a game-changing program due to its size, its advanced technology, and most importantly for Magellan, its manufacturing and process technology. We are pleased that the Canadian Government, through the SADI program, is able to provide Magellan Winnipeg - Bristol Aerospace division with critical assistance in meeting the technology investments required to launch this program. We are also investing in capability for the JSF program in other Magellan locations, and we have been in discussions with various levels of Government in the areas of training and sophisticated tooling, both in Manitoba and Ontario." The balance of the funding for these investments will be met by applying a portion of Magellan's annual capital budget over the five to seven years of the program buildup.

Lockheed Martin is developing the F-35 with its principal industrial partners, Northrop Grumman and BAE Systems. The F-35 is a supersonic, multi-role, 5th generation stealth fighter. Three F-35 variants, derived from a common design, developed together, and using the same sustainment infrastructure worldwide, will replace at least 13 types of aircraft for 11 nations initially, making the F-35 the most cost-effective fighter program in history. Two separate, interchangeable F-35 engines are under development: the Pratt and Whitney F135; and, the GE Rolls-Royce Fighter Engine Team F136.

Magellan has been manufacturing low quantities of components and assemblies of the JSF program for five years as the aircraft has progressed through test articles, prototypes, and low rate production stages, including initial work on the two engine candidates. As a result Magellan considers itself to be well positioned to secure future contracts for participation in the JSF programs related to the F-35. "The precision required for components and assemblies has advanced the manufacturing technologies to a new level of performance," said Don Boitson, Magellan's Vice President and General Manager of the Winnipeg facilities. "We have benefitted through material testing in our Winnipeg labs, and through collaboration with the Winnipeg-based Composites Innovation Centre. We have also received outstanding assistance from our customers. The program prime contractor, Lockheed Martin of Fort Worth, Texas, has been engaged throughout the initial phases and we look forward to growing this relationship as the program matures."

In particular, Magellan has entered into contracts with Pratt and Whitney and Rolls-Royce for initial engine work. The F135 fan sync ring and the F136 front frame are critical hardware that requires advanced machining capabilities and strict quality standards. Magellan has also entered into letters of intent with each of BAE Systems and Lockheed Martin in relation to the production of two major assemblies on the aircraft, and is pursuing additional participation in engine production and after-market support. Based on current estimates for the scope of the JSF program and the status of its discussions with Lockheed Martin and BAE Systems, Magellan management estimates that the scope for deliveries by Magellan of aircraft and engine components over the next 25-30 years as a result of the JSF program could be as much as $3 billion (US), with revenues of up to $120 million (US) per year once full rate production is achieved.

The estimate of deliveries over the next 25-30 years is subject to a number of assumptions and risks, including that the JSF program for the F-35 aircraft continues and is not delayed, and that final contractual relationships are established between Magellan and its customers.

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